Is the following correct? Win percentage 1% Win rate 60% Loss percentage 1% Loss rate 40%. expectancy = (1% x 60%) - (1% x 40%) The expectancy is 0.2% per trade.
Seems rather thin, ADX. It would not take much to upset the apple cart. But then, I'm not really the guy to ask.
I'm not a daytrader so I can't say if it is good or not. Make sure you factor in your transaction costs. I created a table in Excel to show different win/loss rates and the associated profit factor. I also attached a chart of the same table. The line in the chart represents the breakeven point. You want to be above the line to be profitable. Pw = winning percentage PL= loosing percentage Aw= average win AL= average loss Win % Loss % Breakeven Aw/AL 0.10 0.90 9.00 0.15 0.85 5.67 0.20 0.80 4.00 0.25 0.75 3.00 0.30 0.70 2.33 0.35 0.65 1.86 0.40 0.60 1.50 0.45 0.55 1.22 0.50 0.50 1.00 0.55 0.45 0.82 0.60 0.40 0.67 0.65 0.35 0.54 0.70 0.30 0.43 0.75 0.25 0.33 0.80 0.20 0.25 0.85 0.15 0.18 0.90 0.10 0.11 0.95 0.05 0.05 As an example, if your average win is $300 and your average loss is $100, then Aw divided by AL (also called the profit factor) is 3. From the table you would then need a winning percentage of 25% to breakeven and >25% to be profitable. Your original question had a 60/40 win/loss rate. From the table this would require a profit factor (Aw/AL) of 0.67 to breakeven and greater than 0.67 to be profitable. Yours was 1.0 so it is profitable.